I’m excited. This morning I figured out a timeline for making us 70k in passive income in 2 years. It’s ambitious, but I think it can be done.
Basic information is that it costs 50k to buy a rental property that I’m comfortable with (this is the total including repairs, purchase price, and other costs). Paying 50k should yield 1k per month on average for a rental price. Subtract from that management fees, taxes and insurance and I net $700-$750 per property if I pay cash, minus any repairs that might come up.
I already own 2 which have nice tenants and have not caused any issues so far. I bought them for cash so there is no mortgage cost. I’ve been debating about taking out mortgages so I can buy more. I never used to believe in it, but if the mortgage on a 50k house is $250-$300 per month, and the rent is $1000, I really feel like I can’t go wrong.
Here’s the timeline: (each number represents one rental in the order I purchased/will purchase)
May 2010 – 1 – Cash
June 2011 – 2 – Cash
November 2011 – 3 – Mortgage 1
January 2012 – 4 – Mortgage 2
June 2012 – 5 – Cash
August 2012 – 6 – Mortgage 3
November 2012 – 7 – Mortgage 4
February 2013 – 8 – Cash
June 2013 – 9 – Mortgage 5
September 2013 – 10 – Mortgage 6
Because I can’t finance the new purchases I’ll mortgage the rented properties and pay cash for the new ones. Net $500 per mortgaged property after expenses, $750 per unmortgaged property after expenses = $6000 per month across 10 properties. Will there be expenses here and there? A new roof? Broken pipes? Electric problem? Water heater issue? Crappy tenant? Of course. I’m hoping to lower my risk by putting newer systems in the properties with my initial 50k investment and buy in nicer neighborhoods similar to where my current properties are.